International transportation and sanctions: schemes for the delivery of goods to Russia

In the context of unprecedented economic constraints, Russian business is facing a serious challenge in the field of international transportation. The usual logistics chains that have been built for decades have been severed, and standard routes for the delivery of goods have been blocked. However, contrary to pessimistic forecasts, domestic entrepreneurs have shown adaptability, finding new ways and solutions to continue foreign economic activity.

In this article, we will take a detailed look at how the logistics of international transportation has changed, what schemes for the delivery of goods to Russia are working today, and what challenges participants in foreign economic activity face. Special attention will be paid to the practical aspects of organizing deliveries, legal nuances and evaluating the effectiveness of various logistics solutions.

How did it all start?

Radical changes in the field of international transportation began in February 2022, when Western countries introduced large-scale sanctions against Russia.The first blow fell on air traffic: the closure of airspace led to the impossibility of direct air travel between Russia and most European countries. This was followed by restrictions on maritime transport: the world's largest container lines, such as Maersk, MSC and CMA CGM, announced the termination of work with Russian ports.

By the summer of 2022, the situation was aggravated by the introduction of the fifth и The sixth package of sanctionsThe EU, which significantly limited road freight transportation and created difficulties for rail transport. European companies were prohibited from providing insurance and reinsurance services for marine transportation of Russian oil, which indirectly affected the entire field of marine logistics.

In response to these challenges, the Russian Government has taken a number of measures:

1. Legalization of parallel imports.
2. Simplification of customs procedures for certain categories of goods.
3. Support for the development of logistics infrastructure in friendly countries.

The business also did not stay away, starting to actively look for alternative routes and supply chains. Thus began a new era in the history of Russian logistics, characterized by increased complexity, increased delivery times and, as a result, increased freight transportation costs.

Key changes in numbers:

• Increased delivery time by 30-60%.
• The increase in logistics costs by 40-100%.
• Redistribution of cargo flows in favor of the eastern direction by 35%.
• An increase in the role of intermediary countries in the organization of supplies by 70%.

These changes forced the participants of the foreign economic activity to completely reconsider their approaches to the organization of international transportation and look for new, non-standard solutions to maintain business in the face of sanctions restrictions.

And what happens in 2024?

By 2024, the Russian logistics market has largely adapted to work under sanctions, successfully rebuilding the main routes to the east and through the countries of Central Asia. The share of rail transport has increased significantly, and the development of multimodal delivery schemes has partially compensated for restrictions in other modes of transport.

After a sharp increase in 2022-2023, there was a relative stabilization of the cost of transportation, although delivery times still remain increased by an average of 20-30%. The active introduction of Russian digital platforms and automation of customs procedures have helped to optimize processes and reduce costs. Despite the continuing difficulties with international financing and insurance, business has found new opportunities in cooperation with the EAEU and BRICS countries, as well as in the development of domestic logistics companies.

In general, by 2024, participants in foreign economic activity have learned to work effectively in new conditions, building alternative supply chains and optimizing international transportation processes.

Council Regulation (EC) No 833/2014 of July 31, 2014 on restrictive measures in connection with Russia's actions destabilizing the situation in Ukraine (taking into account the 13th package of sanctions as of 06/25/2024).
14 the EU sanctions package (от 24.06.2024).

A source: https://www.alta.ru/tnved/forbidden_codes/

New realities of international supplies to Russia

Overcoming barriers with the help of marine logistics

Maritime transportation has traditionally been the main way of delivering imported goods to Russia, providing up to 60% of the country's total cargo turnover with the outside world. However, after the imposition of sanctions, the situation has changed dramatically.

Vitaly Pankratov, President of the National Association of Sea Carriers (publication in the journal "Marine News of Russia", July 2023):

"The reorientation to the ports of the Far East has allowed us to maintain the bulk of sea freight traffic. Vladivostok and Nakhodka increased cargo turnover by 45%, partially compensating for losses in the Baltic direction. The key task now is to modernize the port infrastructure to handle the increased flow of containers."

Key changes in the industry:

• The refusal of the largest carriers to work with the Russian Federation led to the need to find new partners among companies from Asia and the Middle East. Many Chinese and Turkish shipping companies have significantly expanded their presence in the Russian market.
• The complication of cargo insurance procedures has caused the cost of insurance policies to increase 2-3 times. Russian insurers have developed new products for maritime transportation, partially compensating for the departure of Western insurance companies.
• The increase in delivery time by 20-30 days is due to the need to use intermediate ports. Cargo is now often transshipped at ports in Turkey or the UAE, which increases the total travel time.

Current solutions:

• The reorientation to the ports of the Far East allowed to increase cargo traffic through Vladivostok and Nakhodka by 40%. New terminals are being created in these ports and the existing infrastructure is being upgraded to handle the increased volume of containers.
• The development of cooperation with carriers from friendly countries has led to the emergence of new players in the market. Iranian and Indian shipping companies have begun to actively work with Russian cargoes, offering competitive prices and regular flights.
• The use of shuttle ships for cargo transshipment has become a common practice. Small vessels carry out delivery between intermediate ports and Russian terminals, which makes it possible to circumvent restrictions on the entry of large international vessels into Russian ports.

Motor transport and search for alternative routes

The main directions of development:

• The strengthening of the eastern vector has led to an increase in cargo traffic through border crossings with China. Additional lanes for freight transport have been organized at key checkpoints, and the time for customs procedures has been reduced by an average of 40%.
• The creation of hubs in the border regions contributed to the optimization of logistics chains. New distribution centers equipped with modern equipment for cargo handling and storage have been opened in the Kaliningrad Region and the Far East.
• The development of domestic routes has made it possible to reduce dependence on international transportation. Russian transport companies increased their fleet of trucks and expanded the geography of domestic transportation, which partially compensated for losses on international routes.

Andrey Savchenko, Chairman of the Board of the Association of International Road Carriers (report at the conference "Truck Transportation 2023", May 2023):

"The reorientation to the eastern direction required a serious restructuring of the entire road transportation system. We see a 60% increase in cargo traffic through Kazakhstan. Russian carriers are actively updating their fleet and investing in the creation of new logistics hubs at the border."

Statistics and trends:

• The waiting time at the border with Kazakhstan has been reduced by 30% due to the introduction of an electronic queue. Carriers can now book a border crossing slot in advance, which greatly simplifies route planning.
• The cost of transportation has increased by an average of 15-20% due to an increase in the length of routes. However, process optimization and competition between carriers help to restrain further price increases.
• The number of companies specializing in transportation to Asian countries has tripled. Many European destinations have been successfully replaced by routes through Kazakhstan, Mongolia and China.

Olga Fedotkina, Director of Development at AvtoTransLogistics (comment for Kommersant, August 2023):

"The cost of road transportation has stabilized after a sharp increase at the beginning of the year. We are witnessing an increase in competition in the Asian direction, which contributes to the optimization of tariffs. The key problem remains the shortage of drivers for international flights."

Railway transportation: steel track to the east

Advantages of railway logistics:

• The stability of the train schedule allows you to accurately plan deliveries. Deviations from the schedule are minimal, which is especially important for manufacturing enterprises operating on a "just-in-time" system.
• The ability to transport large shipments makes rail transport cost-effective. One train can replace up to 100 trucks, which significantly reduces the unit cost of transportation.
• Independence from weather conditions ensures uninterrupted supply all year round. Unlike sea and road transport, the railway is less affected by adverse weather factors.

Oleg Belozerov, General Director of Russian Railways (speech at the Eastern Economic Forum, September 2023):

"Cargo turnover at the Eastern landfill increased by 15% compared to last year. We are consistently increasing the capacity of the BAM and Transsib, which allows us to meet the growing demand for transportation in the eastern direction."

Infrastructure development:

• The modernization of existing routes has allowed to increase the speed of trains by 25%. The tracks were replaced in key areas and the alarm system was updated, which significantly increased the throughput.
• The construction of new terminal and logistics centers along the main routes has optimized the cargo handling process. In these centers, not only transshipment is carried out, but also customs clearance, which reduces the total delivery time.
• The introduction of digital technologies for real-time cargo tracking has increased the transparency of transportation. Customers can receive up-to-date information about the location and condition of their cargo through a special mobile application.

Alexey Gromov, Director of Analytics at Russian Railways Logistics (publication in the Russian Railways Partner magazine, November 2023):

"The development of container transportation has become a key trend in 2023. The volume of container shipments in communication with China increased by 35%. We see steady demand for expedited delivery services, especially from e-commerce companies."

The current situation in the aviation logistics market

Major changes in the industry:

• The closure of the airspace of the European Union and a number of other countries has led to the need to build new routes through the territories of friendly states. Flight time in many directions has increased by 30-40% due to the lengthening of routes.
• The termination of leasing contracts with Western companies reduced the fleet of cargo aircraft by 20%. Russian airlines are actively transferring aircraft to the Russian registry and are looking for alternative sources of spare parts.
• The withdrawal of large international express carriers from the Russian market has created a niche for local companies. Russian logistics operators are expanding their aviation units, partially filling the vacuum that has formed.

Change statistics:

• The volume of international cargo transportation decreased by 65% compared to the pre-sanctions period. The largest drop is observed in the European and North American directions.
• The cost of air delivery increased by an average of 150-200% due to an increase in flight distance and time. Some destinations have risen in price even more due to the need for additional technical landings.
• Delivery times have increased 2-3 times on most international routes. This is due to both the lengthening of routes and the need for additional approvals and paperwork.

Maxim Sokolov, CEO of PJSC Aeroflot (press conference on the results of 2023, December 2023):

"Despite the closure of the European skies, we have maintained the main directions of cargo transportation by developing routes through the countries of the Middle East and Central Asia. The volume of cargo transportation on domestic routes increased by 25%, which partially compensates for losses on international lines."

Technical solutions:

• The transfer of foreign aircraft to the Russian registry allowed us to preserve a significant part of the fleet. Rosaviation has developed special procedures for certification and maintenance of airworthiness of such aircraft.
• The development of our own aircraft maintenance centers has partially solved the service problem. Russian companies have mastered the repair and maintenance of the main types of cargo aircraft, which has reduced dependence on foreign service centers.
The modernization of the existing fleet of domestic cargo aircraft has extended their service life. New equipment is being installed on the Il-76 and other Russian-made cargo aircraft, which increases the efficiency and safety of flights.

Roman Gusarov, head of the industry portal (interview with Izvestia, June 2023):

"Russian airlines are successfully solving the problem of maintenance of foreign aircraft. Certified repair centers have been established, and spare parts supply channels have been established through friendly countries. This allows you to maintain the airworthiness of the existing fleet

Organizational measures:

• The creation of new logistics hubs in friendly countries has optimized delivery routes. Airports in the UAE, Turkey and Central Asian countries have become key points for cargo transshipment.
• The development of partnerships with airlines from friendly countries has expanded the geography of flights. Codeshare agreements have been concluded with carriers from China, Turkey and the Persian Gulf countries.
• Simplification of customs procedures for air cargo from certain countries has accelerated the clearance process. A number of airports have implemented a pre-declaration system, which reduces the time for customs formalities.

Russia's Logistics partners: who helps in circumventing the restrictions?

Mechanisms of interaction

Financial instruments:

• The use of national currencies in settlements has reduced dependence on the dollar and the euro. More than 60% of payments for logistics services are now made in rubles, yuan and dirhams, which minimizes the risks associated with Western sanctions.
• The development of alternative payment systems has ensured the continuity of financial transactions. The Bank of Russia's financial messaging system and the Chinese CIPS system have become the main channels for international payments.

Legal mechanisms:

• Simplification of customs procedures for companies from friendly countries has accelerated the process of cargo clearance. The principle of "one window" has been introduced and the list of goods subject to simplified declaration has been expanded.
• The creation of special economic zones with preferential tax treatment attracted new logistics operators. In such zones, companies receive tax holidays and a simplified registration procedure, which stimulates the development of logistics infrastructure.

Development prospects

• The introduction of blockchain technologies into logistics processes will increase the transparency and safety of transportation. Smart contracts will automate many operations and reduce the risks of fraud in international shipments..

• The development of multimodal transportation using a single transport document will simplify the delivery process. The cargo will be able to change the mode of transport without additional paperwork, which will reduce the time for administrative procedures.

• The creation of digital counterparts of logistics routes will optimize transportation in real time. Artificial intelligence will analyze many factors and suggest optimal routes based on the current situation.

Svetlana Domnina, Director of Digital Transformation at PEC (speech at the Digital Logistics Forum, July 2023):

"We see an explosive growth in demand for digital solutions in logistics. The introduction of artificial intelligence systems to optimize routes has reduced delivery time by 20% and reduced operating costs by 15%."

Updated 11.10.2024